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By Vittorio Hernandez
London, England, United Kingdom
Two independent British think tanks warned of harder times ahead for the country due to the slowdown in the global economy and a prolonged debt crisis in the eurozone.
The Centre for Economic and Business Research (CEBR) forecast a weak 0.7 percent gross domestic product expansion for Britain in 2012 and cut its forecast for this year to 0.6 percent from 1 to 1.5 percent.
The CEBR warned of a Lehman-style financial crisis in the eurozone, which could threaten to severely reduce the potential for export demand and business investment that would further drive down the British economy.
Although trade unions and Labor MPs have called for the coalition government to reconsider its austerity program, the CEBR said it would be politically damaging and would risk unnerving the markets. The think tank placed the burden on avoiding a double-dip recession on the Bank of England.
The CEBR forecasts interest rates to remain on hold until mid-2013 and for more quantitative easing.
However, independent forecaster Ernst and Young doubted that the bank's new quantitative easing would lead to a prompt recovery.
Ernst and Young also downgraded its forecast to a 0.9 percent GDP growth rate this year, down from its previous 1.4 percent growth projection. The think tank, however, is more optimistic about next year and foresees the British economy expanding 1.5 percent, although it is still lower than a previous forecast of 2.2 percent.
The think tank forecast the number of jobless Britons to go up to 2.7 million from the current 2.57 million in the next 18 months. It pushed for a 25-basis points cut in interest rates from the current record low of 0.5 percent.
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World - Think Tank Forecasts Slight GDP Expansion For Britain | Global Viewpoint